Somebody who is more in the know about this stuff more than I am care to explain what the hell is going on. Now it lookes like Countrywide might file for bankruptcy. I know whats causing it…but what is the end result to all this?
What kinda effect is this gonna have on the economy?
(Feel free to move to Politics board if needed)
It may deepen the current housing slump and eventually spur a dreaded recession. In my opinion, I feel the Fed needs to cut the prime rate fairly convincingly to hopefully ward off an evetual recession. Regards, Oldniner
Sub-Prime mortgage industry was so competitive that many lenders began to become too lenient in regards to qualifications. Lower rates, higher LTV’s, riskier credit profiles, etc…the result: More frequent defaults and higher losses. Not a good combo. Couple that with the fact that the good credit customers are not buying right now (so they can’t count on adding good credit customers to balance out their portfolios) and you have a recipe for disaster. PLUS with the housing market down in general…losses are growing while new loans are decreasing…it now doubles the rate of loss in their portfolio.
Investors and stockholders don’t like to see that (quote from Captain Obvious). I’ve been in finance for ever. Slow times always reveal the companies that abandoned a sound business practice in order to compete for volume. They plan on “outrunning” their deliquency by adding a lot of volume…and that works until the market dries up. When you can’t outrun it anymore…the losses catch up in a hurry…especially with marginal credit customers.
[QUOTE=KTown49er;253665]Slow times always reveal the companies that abandoned a sound business practice in order to compete for volume. They plan on “outrunning” their deliquency by adding a lot of volume…and that works until the market dries up. When you can’t outrun it anymore…the losses catch up in a hurry…especially with marginal credit customers.[/QUOTE]
QFT
It’s killing my 401K, I’ve lost 8.8% per share since the all time high on July 19. But I know… it’s fantasy money until I remove it. My BBT stock is finally recovering today.
Housing will likely suffer for a good while. The worldwide economy overall is still strong. This is just a short term blip, although seeing things so volitile is a bit scary.
I put my house on the market then this crap hits. I have tremendous timing.
I have 2 homes I can’t sell because many neighbors foreclosed, & drove down the market. I have renters now, but went through streches of losing my a55 every month.
Now the homes are worth less than I owe because of the down market.
[QUOTE=oldniner;253663]It may deepen the current housing slump and eventually spur a dreaded recession. In my opinion, I feel the Fed needs to cut the prime rate fairly convincingly to hopefully ward off an evetual recession. Regards, Oldniner[/QUOTE]
As long as inflation remains tame I don’t think the Fed will act. The Fed has far less control over things these days than in the past. It’s more of a “world” market these days and liquidity seems to be the overriding factor. Countrywide had to tap into a higher cost line of credit to fund its mortgages. NOT a good thing.
[QUOTE=HP49er;253668]
It’s killing my 401K, I’ve lost 8.8% per share since the all time high on July 19. But I know… it’s fantasy money until I remove it.[/QUOTE]
I haven’t even looked at mine and I don’t plan to either.
Who bares the the majority of fault here? Greedy lenders or people not understanding their mortgages.
While personal responsibility comes into play …I tend to think lenders shouldnt be giving out loans to any joe blow who comes along. Seems very irresponsible.
[QUOTE=casstommy;253676]Who bares the the majority of fault here? Greedy lenders or people not understanding their mortgages.
While personal responsibility comes into play …I tend to think lenders shouldnt be giving out loans to any joe blow who comes along. Seems very irresponsible.[/QUOTE]
That’s the million dollar question. It’s both sides fault, although I strongly believe in caveat emptor.
Who bares the the majority of fault here? Greedy lenders or people not understanding their mortgages.
responsibility comes on both.
The feds will most likely drop the rates by 0.5%, at least, in September.
[QUOTE=casstommy;253676]Who bares the the majority of fault here? Greedy lenders or people not understanding their mortgages.
While personal responsibility comes into play …I tend to think lenders shouldnt be giving out loans to any joe blow who comes along. Seems very irresponsible.[/QUOTE]
Is it irresponsible for the lenders? I would say it is more of a bad business model. A company is in business to make money plain and simple. The lenders just made bad risk decisions sometimes. If you are upset with the lenders then credit card companies and car lenders should also be at the top of your list. As for the cutomers they carry most of the fault IMO. You signed up for the mortgage and you should take the time to understand it.
[QUOTE=VA49er;253677]That’s the million dollar question. It’s both sides fault, although I strongly believe in caveat emptor.[/QUOTE]
I agree both sides are at fault. But I also feel like this isnt a chicken or the egg type question. Without these predatory lending practices, there cant be ill advised home purchases.
Its these type of practices that make people call for government oversight.
[QUOTE=WBNiner;253680]Is it irresponsible for the lenders? I would say it is more of a bad business model. A company is in business to make money plain and simple. The lenders just made bad risk decisions sometimes. If you are upset with the lenders then credit card companies and car lenders should also be at the top of your list. As for the cutomers they carry most of the fault IMO. You signed up for the mortgage and you should take the time to understand it.[/QUOTE]
The problem is/was the lenders didn’t car about the risks. Wall St is so damn concerned on current earnings long term viability be damned. As a result, fee income, etc adds to the bottom line immediately thereby increasing earnings. Also, most banks sell their mortgages as securities so after the deal is done they could care less if the mortgage defaults.
[QUOTE=WBNiner;253680]Is it irresponsible for the lenders?[/QUOTE]
[URL=http://www.hud.gov/offices/hsg/sfh/pred/predlend.cfm]HUD[/URL]
(Not taking sides, they’ve already been taken). The term wouldn’t exist if there wasn’t some joint culpability on the part of the lenders.
[QUOTE=VA49er;253682]The problem is/was the lenders didn’t car about the risks. Wall St is so damn concerned on current earnings long term viability be damned. As a result, fee income, etc adds to the bottom line immediately thereby increasing earnings. Also, most banks sell their mortgages as securities so after the deal is done they could care less if the mortgage defaults.[/QUOTE]
D.O.B.A.
[QUOTE=HP49er;253668]My BBT stock is finally recovering today.[/QUOTE]
BBT, up 2.13, +5.70% 
Some of the mortgages are tricky.
I had a mortgage that was interest only, & over a year’s time, the interest rate slowly climbed, & I was paying double. You shouldn’t have your payments go up. They should structure any increases to the end of the loan, so you can pay it when you sell.
I had to re-fi because I couldn’t keep up. If I hadn’t, I would have had to foreclose.
Interest only loans are designed to be short term, like for constuction loans. They are intended for property you are looking to flip or only hold onto for a short period of time. If someone conned you into using that as a primary residence mortgage I would go back to them and punch them square in the face!!!
It was an investment, but the market is bad, so you can’t sell it.